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Saturday, July 19, 2008

Sony Ericsson Is with 95.5% Less Profitable Than in Q1 2008

Not long after unveiling the upcoming release of the new Walkman handsets (July 22 is the awaited date), Sony Ericsson has announced its financial results for the second quarter of 2008, which are far from being great. The Swedish-Japanese joint venture reports a net profit of only 6 million Euros for Q2 2008, with 95.5% less than the net profit reported for the first quarter of the year (133 million Euros).

The almost disastrous profit drop occurred even despite the total number of Sony Ericsson handsets sold worldwide in 2008's second quarter - 24.4 million units, with 1.1 million more than the number of phones sold in the first quarter. The handset's average selling price (ASP) for the second quarter was of 116 Euros, slightly less than the ASP reported for Q1 – 121 Euros.

Because of the low profits registered, Sony Ericsson is apparently considering cutting 2,000 jobs (out of the ~8,000 total number of current employees).

"We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth," declared Dick Komiyama, President of Sony Ericsson. "The measures we are taking are aimed at becoming a faster, more agile and more cost efficient organization that can continue to create innovative products that excite consumers. Our target is to achieve a reduction in operating expenses of Euro 300 million annually, with the full effect expected to appear within a year. We estimate that our restructuring charges will be of the same magnitude as our reduction in operating expenses, and we will incur such charges as our measures are implemented."

Sony Ericsson's financial results for the second quarter of 2008 come one day after Nokia also announced its stats. By comparison, Nokia's net profit was of 1.1 billion (1,103 million) Euros. Furthermore, the Finnish company shipped more handsets in Europe alone than SE has worldwide. The total number of Nokia phones sold around the globe is of 122 million – "only" with almost 100 million more than the SE handsets.

Although the third and the fourth quarter of 2008 should bring a whole batch of new Sony Ericsson handsets on the market (some of them being really "hot," like the Xperia X1 or the 8.1 Megapixel C905 Cyber-shot slider), the Swedish-Japanese company expects its future financial results to be similar to the ones from the second quarter.

Well, we can only hope that Sony Ericsson will soon report better results. But, for this to happen, SE should release all the newly announced handsets faster, and not in a 7-month timeframe, such as is the case with Xperia X1.

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